ANALYSIS: Brazil’s Rousseff laid low by scandal, Lula’s return

losing grip:An aide said that Rousseff recognizes her mistakes and can rebound from them, but the Palocci crisis leaves her even more dependent on coalition allies

Reuters, BRASILIA
and RIO DE JANEIRO, Brazil

As Brazilian President Dilma Rousseff coasted to victory in last year’s presidential election, one doubt kept cropping up — would the career bureaucrat be savvy enough to handle Brazil’s dog-eat-dog political world?

After a turbulent few weeks that have shaken her young administration, the evidence is mounting that she isn’t — a failing that could have serious policy consequences as the government faces a slowing economy and high inflation.

Rousseff has emerged weaker from a scandal that has embroiled her influential chief of staff Antonio Palocci and revealed cracks in the coalition that exacerbated a defeat in Congress last week.

At the heart of the crisis are doubts over the leadership style of Rousseff, a former leftist militant who lacks the easy charm of former Brazilian president Luiz Inacio Lula da Silva.

Her advisers accept she paid too little attention to political matters in her first five months in office, focusing more on technical and administrative issues.

That left the government vulnerable when revelations emerged last month that Palocci, whose position now appears at risk, had enjoyed a surge in his personal wealth that could result in a federal investigation. Rousseff’s problems have been compounded by lingering health issues following her successful cancer treatment in 2009.

Aides say she has learned from her mistakes and is devoting her attention to defending Palocci — a Wall Street favorite whose departure would likely rattle markets — and patching up ties with her main coalition partner, the PMDB party.

However, the risk is that Rousseff’s agenda will get bogged down further as she is forced to give more concessions to lawmakers and her approval ratings likely fade along with Brazil’s economic growth.

“The political cost for Dilma to govern could rise sharply,” said Cristiano Noronha, an analyst for political consultancy ARKO.

One senior government official said that Palocci had been weakened by the scandal, but Rousseff would not seek to replace him unless damaging new evidence emerges over his earnings as a consultant while he was a lawmaker.

“It’s difficult to say whether the worst is over,” the official said.

Nothing illustrated Rousseff’s problems more starkly than the sight last week of Lula striding back on to the political stage in Brasilia five months after he bowed out with stratospheric approval ratings.

He was there to scratch backs and soothe the concerns of disgruntled members of the ruling Workers’ Party and the PMDB, which turned rebellious in a vote on a new forestry code over what it perceives as a lack of favors from the Planalto presidential palace.

He helped broker a truce between the coalition allies but the return of the former union boss, who has not ruled out running for president again in 2014, was a clear blow to Rousseff’s efforts to shape her own presidency.

Rousseff did not request his help and was dismayed that he did not do it in a more low-profile way, another senior government aide said.

“Dilma has been gravely affected by Lula’s interference in the crisis,” said Amaury de Souza, a senior partner at consultancy MCM Associados. “It essentially showed that he is the power behind the throne, that he will come and sort things out whenever necessary.”

Rousseff could well bounce back from the first major crisis of her administration. Lula himself was almost felled by a far bigger corruption scandal in his first term that led him to pay more attention to political coordination with Congress.